With rising delinquency rates and the very real risk that they will not be paid the amounts they are owed, credit card companies are settling older debt for less than the balance. Capital One is in the same situation as the other credit card companies. Published programs about debt settlement are rare, as banks don't want settlement guidelines to become public knowledge; to work out a settlement, sometimes you just have to ask.
Catching Up Delinquent Accounts
Your first stage in debt settlement may be when you first become past due on your account. According to a 2009 report by Consumer Reports, Capital One is offering to waive interest charges for six months on delinquent accounts to help people catch up on their bill. Other offers could include fee waivers and longer-term interest rate reductions. These offers work best for people who are not extremely past due — usually six months or less — and who can afford to catch up on their payments.
If Capital One has transferred your account to its in-house collections department or an outside collector, it is more likely to negotiate a settlement. This process may take some time, and requires perseverance and patience on the part of the borrower. Settlement amounts vary between 20 and 75 percent of the original balance, and much of this depends on how long it has been since you made a payment. Start offering on the low side of the scale. It may take several conversations and many weeks before you reach an agreement.
Using an Outside Company
Debt settlement companies are willing to do the heavy work of settlement negotiations for you. While there are professional organizations who do a good job at this, many of the companies offering these services are scams. When choosing a debt settlement company, avoid any that charge high upfront fees before they do any work for you. Many of these companies make unrealistic promises, such as a promise to settle all of your debt for a specific amount, or that a creditor will not sue you and they can make the creditor stop calling. A settlement company cannot keep these promises. Capital One may be more likely to work with the original debtor than a settlement company.
If you reach an agreement with Capital One on a settlement amount, be sure to get the agreement in writing. The agreement should say that the amount you settle for is payment in full, or settlement in full, for the entire debt. Always keep a copy of that letter, and proof of your payment, such as a copy of the check or money order that you sent, forever. Do not allow a credit card company electronic access to your bank account at any time for any reason. A settled debt will show as settled on your credit report, and can impact your credit score.
- Consumer Reports; Your Credit Card Company May Have a Deal for You; August 2009
- MSN Money; When Debt Settlement Makes Sense; Liz Pulliam Weston; June 2009
- Federal Trade Commission. "Time-Barred Debts." Accessed Oct. 30, 2019.
- myFICO.com. "Settling” a Debt: The Pros and Cons." Accessed Oct. 30, 2019.
- Consumer Financial Protection Bureau. "How to Tell the Difference Between a Legitimate Debt Collector and Scammers." Accessed Oct. 30, 2019.
- Fair Debt Collection Practices Act. "§ 1692c. Communication in Connection With Debt Collection." Accessed Oct. 29, 2019.
- Internal Revenue Service. "Canceled Debt – Is It Taxable or Not?" Accessed Oct. 30 2019.
Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.